29 November 2017, News wires – Royal Dutch Shell Plc has announced the cancellation of its scrip dividend, with effect from the fourth quarter of this year.
The cancellation means that the fourth quarter 2017 interim dividend, and future dividends, will be settled entirely in cash rather than the company offering a share-based alternative.
The third quarter 2017 interim dividend, payable on December 20, 2017, will not be affected and will provide eligible shareholders with a choice to receive that dividend in cash or in shares.
Shell also revealed that its outlook for annual organic free cash flow has increased to between $25 and $30 billion by 2020, at a Brent crude oil price of $60 per barrel. This is $5 billion more than the outlook Shell provided during its capital markets day in June 2016.
The company confirmed that its $30 billion divestment program between 2016 and 2018 had almost been delivered too, with deals worth $23 billion completed, $2 billion announced, and $5 billion in advanced progress. Once this program is completed the company expects to continue divestments at an average rate of more than $5 billion until at least 2020.
“We have increased our outlook for organic free cash flow, which has been consistently strong over the past five quarters,” said Royal Dutch Shell Plc Chief Executive Officer, Ben van Beurden, in a company statement.
“We have also made significant progress with our divestment program, allowing us to reduce net debt in that time. Meanwhile, we intend to cancel our scrip dividend program with effect from the fourth quarter 2017,” he added.
Oil and gas analysts at investment banking firm Jefferies said Shell’s divestiture progress had given the company ‘line of sight’ in reducing its net debt/capitalization ratio to 20 percent, which is the trigger for scrip elimination.
“We estimate Shell needs $45 per barrel Brent to break even in 2018, which had assumed a scrip dividend uptake of 30 percent, and by exercising flexibility in its capital spending Shell would be able to fund the full dividend with free cash flow at about $50 per barrel,” Jefferies analysts stated in a brief research note sent to Rigzone.
“We believe that Shell has the most resilient cash flow profile in the European integrated oil sector, yet the stock’s dividend yield remains the highest in the peer group,” the analysts added.
Shell also revealed Tuesday an aim to cut the net carbon footprint of its energy products – expressed in grams of CO2 per megajoule consumed – by around half by 2050. As an interim step, by 2035, Shell aims to reduce it by around 20 percent.
“We will do this in step with society’s drive to align with the Paris goals, and we will do it by reducing the net carbon footprint of the full range of Shell emissions, from our operations and from the consumption of our products,” said van Beurden in a company statement.